Memo is the trade arrangement under which a dealer or wholesaler consigns gemstones or jewellery to a retailer or another dealer for a specified period — typically 30 to 90 days — without immediate payment. The recipient may show the goods to clients, attempt to sell them, and either remit payment for items sold or return unsold goods at the end of the memo period. The practice is foundational to the way the diamond and coloured-stone trade actually moves merchandise, particularly for high-value or specialised goods that retailers cannot afford to purchase outright on the speculation that they will sell.

How a memo works

A memo transaction is documented in writing — the memo itself, which lists the goods, their wholesale prices, the term of the consignment, the insurance responsibility during the period, and the terms for payment of sold items and return of unsold items. The memo is signed by the recipient, who acknowledges responsibility for the goods during the period. Title to the goods remains with the consigning dealer; the recipient is a custodian rather than an owner until items are sold and paid for.

The recipient's obligations under a memo are substantial. The goods must be insured (typically by the recipient's policy, with the consigning dealer named as an additional insured), kept secure, and either paid for or returned by the deadline. Failure to meet the deadline triggers obligations including conversion of the memo into a sale at the listed prices, payment of penalties, and — in the most serious cases — accusations of bad faith that can result in blacklisting from the trade networks that maintain memo flow.

Why the trade depends on memo

The economics of fine-jewellery retail make memo essentially unavoidable for any substantial inventory. A retailer with a million dollars of inventory tied up in unsold pieces is bearing substantial capital cost, which compounds rapidly as inventory ages. Memo allows the retailer to display and sell goods without bearing the inventory cost, with the wholesaler bearing the carry until the sale closes. The wholesaler accepts the carry as the cost of distribution, recovering it through the retail margin paid on sold items.

For specialised or high-value goods — important coloured stones, signed jewellery, large diamonds, fine pearls — the volume of likely buyers at any single retailer is too small to justify outright purchase of inventory. Memo allows the wholesaler to circulate a small number of high-value pieces through a network of retailers, each of whom shows the goods to their clients without committing capital to ownership. The system depends on trust: dealers who break memo discipline destroy their access to the network, and the social cost of dishonest behaviour is severe.

Insurance, security, and risk

Memo goods are typically covered by the recipient's jewellers' block insurance policy, which covers theft, loss, damage, and certain other risks while goods are in the recipient's possession. The insurance arrangement is documented in the memo and is one of the principal points of negotiation, particularly for high-value items where the marginal premium cost is substantial. The consigning dealer is typically named as an additional insured to ensure that proceeds in the event of loss flow to the actual owner of the goods.

Security obligations include safe storage, careful display, restricted handling by store personnel, and prudent practices around showing goods to clients. The standard of care is informally understood within the trade and is the subject of substantial industry literature including JCK and Rapaport documentation.

Memo-out and memo-in tracking

Dealers maintain detailed records of goods sent on memo (memo-out) and goods received back (memo-in), with the difference representing inventory currently on consignment with retailers and other dealers. The memo-out balance is part of the dealer's effective inventory but is not in the dealer's physical possession, which complicates inventory management, financial accounting, and physical-security planning. Software systems for the trade typically include detailed memo-tracking modules.

Further reading

• GIA Gems & Gemology — trade practice articles
• JCK — memo and consignment practice
• AGTA — coloured-stone trade conventions